Gold prices, after a strong recovery from a seven-month low near the $1,810 level, are exhibiting minor gains as the market awaits further cues regarding the Federal Reserve’s stance on future rate hikes. Recent dovish comments by several Fed officials, coupled with the relatively modest wage growth shown in the latest US Nonfarm Payrolls (NFP) report, have eased concerns about inflation. This has created an environment that supports the possibility of a shift in the central bank’s policy.
Additionally, the ongoing Israel-Gaza conflict is contributing to gold’s safe-haven appeal. However, market sentiment still anticipates the likelihood of at least one rate hike by the end of the year. This, combined with an overall positive risk sentiment and a slight uptick in the US Dollar (USD), may serve as a limit to further gold gains. Traders are now turning their attention to the upcoming US Producer Price Index (PPI) release and the minutes from the Federal Open Market Committee (FOMC) for potential market-moving insights ahead of the US Consumer Price Index (CPI) data set to be released on Thursday.
From a technical standpoint, gold’s momentum may push it beyond the recent high in the $1,865-$1,866 range, potentially driving it toward the next significant hurdle around the $1,885 level. This level is closely followed by the $1,900 round figure, which is in proximity to the 50-day Simple Moving Average (SMA) and may act as a pivotal point. Further buying could propel gold towards the 200-day SMA, currently situated near the $1,928-$1,930 range.
On the downside, the $1,850 level may serve as immediate support, with a range resistance breakpoint at approximately $1,835-$1,833. Failure to maintain support at these levels might trigger technical selling and bring gold down to the $1,820 support, potentially moving it closer to the multi-month low at around the $1,810 zone. A convincing break below this level would confirm a bearish death cross on the daily chart, with the 50-day SMA positioned well below the 200-day SMA, potentially leading to further price declines.